Henshaw: Time to shift from resource based to knowledge driven economy
Do you consider it imperative for Nigeria to organise an urgent economic summit?
Honestly, I think if there is a time Nigeria needs an emergency economic summit, it is now. There is a strong reason for the country to hold such an economic summit. In the last three or four months, it has become clear that the economy is rudderless. It seems the government has tried everything, jumping from one policy to another and one monetary regulation to the other, and nothing seems to be working. For the most part of this year, the naira has had a free fall, getting to an all time low. And the truth is that the government seems not to have any control of it.
For me, it is like the government has exhausted itself. Its bag of tricks in terms of economic solution has ended, and I think this is the time for the country to actually sit down and discuss. We understand that Nigeria is a mono-economy, an economy that depends on one natural resource, which is oil. I know that talks have happened in the past to diversify the economy. The 2014 national conference weighed diversifying the economy. Previous economic blueprints have also talked about diversifying the economy.
If you go through these blueprints, the diversification of the economy has always tilted towards exploring other mineral resources like solid minerals. It has always been the agenda. As an economist, what Nigeria is experiencing today is the same problem Venezuela is suffering. Venezuela’s currency has dropped drastically and that is because the price of that natural resources, which both Nigeria and Venezuela depend on has depreciated in value. It is what most economists call the resource curse or the Dutch disease, where every sector of the economy has been jettisoned in favour of one natural resource.
I think we have had a lot of blueprints of economic resuscitation in Nigeria, but those blueprints have always tilted towards creating another type of natural resource dependent economy. That is a major problem. And as we have seen, the value of natural resource is not stable. They are highly volatile and susceptible to sharp fluctuations. On the other hand, another area, which the government has seen and has been trying to explore, is agriculture. I think we should have a clear policy in terms of agriculture in Nigeria. For a third world country, like Nigeria, which is still relatively dependent on food import, I think our policy on agriculture should be limited for the time being to attaining food sufficiency. I mean being able to produce enough food to feed our population to the extent that we no longer need to import rice or beans. That should be our short-term agricultural policy, not using agriculture as a new way of earning foreign investment. I think it is a wild goose chase if we do that when we have not been able to achieve food sufficiency.
What are the critical issues to be canvassed during the summit if it holds?
I think the three most fundamental issues are straightforward. The first is diversifying the economy. How do we diversify this economy from a mono-economy? It is emerging right now that the customs has the capacity to be the second largest earner for the country through the ports. How do we get the country properly taxed? Our value added tax is still not measuring up to what is expected of a country with a population of 170 million people. How do we diversify the economy?
Taxation is one way. We need more efficient, more just and more prudent taxation. Is agriculture truly a solution? Should we be thinking of agriculture for self-sufficiency or agriculture as an engagement to bring in foreign earnings? We need to discuss this. We need to discuss the war on corruption on the Nigerian economy and how that war is being prosecuted, because the reality is this: recovering of looted funds has become an economic earner for Nigeria at the moment. We have realised that a lot of the money meant for the development of the country went into private pockets. I think the war against corruption should cease from being simply the initiative of one man, President Buhari.
I think we need to craft a policy that makes that war more entrenched, more in the character of Nigeria; more established institutionalised system of the struggle against corruption. That war needs to be discussed and we need to make it more national. The third thing is that there is so much emphasis on the way the federal government disburses its resources and people seem to forget that the chunk of the resources of the government goes to the state and local governments. And little or no attention is paid to how the states and local government areas actually spend their resources. The summit should focus on how the states and local governments spend their resources. The Fiscal Responsibility Act is not effective at the state level. The Freedom of Information Act seems to begin and end at the federal level. If the states are not expected to be fiscally responsible by having public procurement bureau where procurement processes are done openly and transparently in such a way that there is value for money in every government project, we will continue to have challenges.
We will keep talking of lack of development if over 40 per cent of the country’s resources goes to the state and local governments and we don’t have effective mechanism to check corruption and mismanagement at these levels. This problem has become very dire. In just a few months into the decline of oil price, we saw a situation where a lot of states could not even pay salaries, including some of the richest states that have earned trillions of naira from oil revenue.
Should this government come up with an industrialisation blueprint at this point?
The federal government at the moment has no initiative in this regards from what I can see. It is still thinking of that natural resource-based kind of economy. A country like Norway was a natural resource dependent economy but they realised what is called the Dutch disease, which means that countries that have natural resources tend to depend solely on these while other productive sources are completely jettisoned. In reality, countries that have natural resources are not necessarily richer than countries that are less endowed. We have known about the prevalence of the Dutch disease since the 1990s. We have known that Nigeria has been exhibiting all the symptoms. The Dutch diversified their economy at the time when a natural resource was the mainstay of their economy. That is why the fall in the price of crude oil has not affected a country like Norway.
Now, given the fact that international oil price has fallen and international experts say the price may keep declining till about 2018 when it might get to $80 per barrel, Nigeria has lost that initiative to industrialise. As a country, Nigeria can no longer take the initiative and use the proceeds from its natural resources to transform itself to a manufacturing hub in the West African sub-region for instance. And that is why this kind of economic summit is needed for the government and the private sector to sit down and discuss economic rejuvenation. Such rejuvenation will have to be driven, this time around, by the private sector because the government can hardly meet its bills right now. It can hardly meet its contractual obligations. It can hardly service its N6trn budget, and it is thinking of borrowing money to do so.
For a country that has a penchant for non-implementation of confab resolutions, won’t the proposed summit be another waste of time and resources?
We do in fact have a penchant for non-implementation of reports, but I don’t think it is the issues at stake now. Though I understand it is a reality. But for the government to be thinking about an economic submit by responding to calls by senior citizens, is good. It could be argued that the rationale for the non-implementation of reports in the past is because they were not properly targeted at the economy. There could be other subtle, covert reasons for holding previous conferences and for that reason one section or interest in the country always believes the recommendations of the content does not represent its views or whatever.
If there is anytime the recommendations of any summit should be taken seriously, it is now. I think I like the character of the summit because it is totally an economic one. It has lost all political colour, like the national conference, which wore a lot of religious, political and economic garbs. This is a purely economic summit. It is going to have less political tension like other conferences we have had, and that is what makes it different. I think that having an economic summit that is going to deal specifically with resuscitating the Nigerian economy, solving the decline, and coming up with a blueprint to salvage the naira, will have a national appeal and be less controversial than previous conferences.
The naira has bounced back relatively but N300 to a dollar is still terribly bad. It simply shows that the Nigerian economy is so market driven that it is tilting with the wind. Today it rises; tomorrow it falls. And the international investment community will take no country seriously when its currency is susceptible to such sharp changes and fluctuations.
Shouldn’t Nigeria pursue a knowledge-driven economic agenda like information technology?
I have a socialist orientation but it comes to a point when you just realise that it is only the private sector that can drive this economy. You will ask, why has Nigeria not benefitted from information technology the way other parts of the world like India, China and South Korea have? Or why has Nigeria not benefitted from manufacturing? For me, it is not because the country does not have enough intellectuals to engage in this process, but one of the major problems is brain drain. Countries are not drawing away experts from Nigeria; we are the ones losing experts, throwing them away because of the system.
One example I always like to give is Dunlop that established the facility here in Port Harcourt. I had an interaction with one of the managers who gave a clear-cut reason why Dunlop had to fold up and leave Nigeria. One major reason was lack of power, which adversely affected cost of production. Lack of power and lack of clear-cut system of clearing goods at the ports made Dunlop leave.
So, the government needs to provide an enabling environment by providing basic things that are necessary for private investors to come in and engage in production.
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